New York Markets After Hours

Stocks rebound after two days of losses

Market gets slight reprieve with oil backing off record $135 mark

By

NickGodt

NEW YORK (MarketWatch) -- U.S. stocks finished higher on Thursday, regaining some ground after two days of heavy losses, as investors cheered oil's drop from record highs above $135 a barrel and upbeat jobs data.

Oil first rose to a new record high of $135.09 a barrel after a report that the International Energy Agency plans to downgrade its estimate of global supplies. But the price fell back $2.36 to close at $130.81, as traders took profit from a four-session winning streak. See Futures Movers.

"It continues to be a 'one-story' market," said Marc Pado, market strategist at Cantor Fitzgerald, referring to the impact of surging crude prices on market sentiment in recent weeks.

The Dow Jones Industrial Average
DJIA, -0.05%
finished up 24 points, or 0.2%, at 12,625, with 19 of its 30 components trading higher. The blue-chip index lost 426 point in the previous two sessions as oil surged past $130 a barrel.

Financial stocks, which took a beating over the past two sessions, led the Dow's way higher, with American Express Co.
AXP, +0.54%
up 1.9%, Bank of America Corp.
BAC, +0.20%
up 0.3%, Citigroup Inc.
C, +0.14%
up 3% and J.P. Morgan Chase & Co.
JPM, -0.45%
up 1.5%.

Banks are lobbying to relax accounting rules to value illiquid assets at historical instead of market prices, the Financial Times reported.

Gaining sectors on the S&P 500 included consumer staples and consumer discretionary, health care, financials, and technology. The energy, materials, and industrials sectors were lower.

Oil's reach

"The market is less worried about the economy and subprime problems," according to Tim Speiss, head of the wealth-management arm of Eisner LLP. "But that's near-sighted. If oil stays above $130 a barrel, that's a very significant event and a lot of the sectors of the economy would have to be re-engineered."

Trading volumes continued to remain light, with 1.2 billion shares exchanging hands on the New York Stock Exchange, where gainers topped decliners by 17 to 14. On the Nasdaq stock market, 812 million shares traded and gainers topped decliners by 17 to 10.

"The spike in crude oil and release of the April 30 FOMC minutes focused everyone's attention on the threat of inflation," said Ken Tower, market strategist at Covered Bridge Tactical.

With crude's surge, ING lifted its assumptions on oil prices in a note upgrading Royal Dutch Shell
RDS.A, +0.42%
to buy and StatoilHydro ASA
STO, -1.23%
to neutral.

Fewer jobless claims

Labor Department data released early Thursday showed first-time claims for state unemployment benefits fell back in the latest week, dropping by 9,000 to 365,000 on a seasonally adjusted basis.

Initial claims for the week ended May 17 came in at the lowest level since the first week of April. Claims have been very volatile over the past several weeks, rising as high as 406,000 during the week of March 29. See full story.

The dollar got a lift against major rivals after the better-than-expected jobs data, and extended gains as oil pulled back. See Currencies.

Treasurys fell, sending yields higher, also on the back of the jobs data and with inflation concerns remaining front and center. See Bonds.

Gold also gave back some of its recent gains, as crude fell and the dollar rose. A stronger dollar pressures the price of dollar-denominated commodities, such as gold and oil, as they become more expensive for holders of other currencies.

Movers

A Quebec court blocked the $33 billion acquisition of BCE Inc.
BCE, -0.13%
by a number of private-equity firms after protests from bondholders. BCE shares tumbled 12.5%.

Earnings releases moved shares in NetApp Inc.
NTAP, +2.48%
which dropped 4.6% after the storage-technology firm's outlook came in below analysts' estimates; and in Flowers Foods Inc.
FLO, +2.12%
which rose after reporting a 26% profit increase.

In other earnings news, Tech Data Corp.
TECD, +0.44%
said its first-quarter net income more than doubled to $23 million, or 43 cents a share.

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